from the suing-innovation dept

Many are familiar with the Sony Betamax case, the landmark Supreme Court decision which nearly 30 years ago ruled that selling videocassette recorders to consumers was not copyright infringement. Not as well known, but equally important, was the case of the Diamond Rio.

Fifteen years after Sony, when the future of the home electronics industry turned on the vote of a single Supreme Court Justice, the recording industry sued to kill MP3 players. In fact, it was exactly 15 years ago today when recording industry lawyers told a federal court that Diamond Multimedia’s Rio, one of the earliest MP3 players, was illegal and needed to be stopped before it found its way into consumers’ hands.

Unfortunately, neither the Sony decision nor the Diamond Rio case ended the century-long trend of new technology being met with copyright litigation. On the 15th anniversary of the Rio suit, here are 15 other products/services that have since met with litigation, and how they have fared:

ReplayTV

ReplayTV, a DVR and time-shifting service, was launched in 1997 and marketed by SONICblue, a successor to Diamond Multimedia. In October 2001, the company was sued by TV industry rights-holders over features including commercial-skipping (which was recently given a stamp of approval by multiple federal courts in the DISH Hopper litigation [1] [2]). Legal costs drove the company into bankruptcy in March 2003. The purchaser of the technology, Digital Networks North America (DNNA), announced in June 2003 that it was removing some of the contentious features, which prompted the entertainment industry plaintiffs to dismiss litigation against ReplayTV and SONICblue. ReplayTV.com’s assets were ultimately acquired by DIRECTV.

MP3.com

MP3.com, founded in 1997, preceded modern cloud-based file storage services. The service aimed to permit users, after buying a CD, to listen to that CD at any Internet-connected location. The recording industry sued MP3.com in January 2000, before the company launched. A court ruled against MP3.com in September 2000, and the company was ordered to pay nearly $118 million in statutory damages for willful infringement. As described in a paper by Prof. Michael Carrier, the company ultimately opted to settle for approximately $50 million. According to an ABC News article, “U.S. District Judge Jed S. Rakoff said it was necessary to send a message to the Internet community to deter copyright infringement.” In 2003, CNET bought the domain name, but not the technology or music assets, and currently maintains the site.

MP3tunes

In 2005, Michael Robertson, the founder of MP3.com, again attempted to launch a music service – MP3tunes – which operated personal online storage lockers and a music search engine. In November 2007, stemming from disagreements over a takedown notice issued to MP3tunes, EMI filed suit for copyright infringement against MP3tunes and Robertson. In 2011, after four years of litigation, MP3tunes filed for bankruptcy.

iCraveTV

iCraveTV was a Canadian website, which launched in 1999, and offered online streaming of Canadian and American over-the-air TV broadcasts. In February 2000, a U.S. court issued a preliminary injunction against iCraveTV, prohibiting it from operating in the U.S. Before Canadian courts had the opportunity to consider the issues, that same month iCraveTV discontinued operating in return for plaintiffs’ agreement to withdraw all actions against it.

ClearPlay

ClearPlay is a parental control DVD player that allows content filtering, skipping, and muting of DVD films. This feature allowed parents to design a customized filter for each movie, by choosing whether to skip varying degrees of violence, sexual content, and profanity. Movie studios sued ClearPlay for copyright infringement in 2002, alleging that by editing out content, ClearPlay was creating unauthorized derivative works. Before the case was resolved in the courts, Congress intervened and passed the Family Entertainment and Copyright Act (FECA), which immunized ClearPlay’s product from copyright liability. (The narrow nature of FECA was such that it did not immunize another company, CleanFlicks, which re-sold edited copies of movies; a Colorado court ruled against CleanFlicks in 2006.)

Search Engines

Although widely embraced today as a valuable tool for navigating the Internet, at one time search engine indexing was alleged by rights holders to constitute copyright infringement. For example, an adult entertainment magazine and subscription-only website called Perfect 10 sued Amazon, Google, and others for copyright infringement in November 2004 in California district court, for links to allegedly infringing sites, and for “thumbnail”-sized previews of images.

In another case filed the same year, a plaintiff Blake Field sued search provider Google for indexing poems published on his website, seeking $2.5 million dollars. This claim was rejected by a trial court in 2006.

Several months later, however, the trial court ruled in the Perfect 10 case, holding that while hyperlinks to infringing sites were not likely to be found to be infringing, Google’s thumbnail images were likely to be found to be infringing. In May 2007, the Ninth Circuit Court of Appeals overturned this, finding for the defendants on all counts. The court held that Google was not liable for contributory or vicarious infringement, and that the thumbnails were not infringing, as they constituted fair use under a theory of transformativeness, and also failed to demonstrate market harm.

Veoh

Veoh, an Internet television company, debuted its beta service in March 2006 and launched out of beta in February 2007. In June 2006, Veoh was sued in a California district court by IO Group, a producer of adult entertainment films. Veoh prevailed on summary judgment, as it was protected by the DMCA’s safe harbors. In September 2007, UMG Recordings sued Veoh and its investors in a different California district court. In September 2009, a federal court again ruled in favor of Veoh, stating that Veoh was appropriately complying with the DMCA and thus not liable, which the 9th Circuit upheld in December 2011. Years of litigation took their toll, however, and Veoh filed for bankruptcy in February 2010, and its assets are now part of a company called Qlipso.

Vimeo

Vimeo, a video-sharing website, was founded in 2004. Last month, a New York federal judge refused to dismiss a copyright case against Vimeo that had been filed in 2009, unconvinced by Vimeo’s argument that it was protected from liability under the DMCA safe harbors. The case is expected to proceed to trial.

YouTube

YouTube, a video-sharing website, was created in 2005, and bought by Google in 2006. In March 2007, Viacom and some other rights holders sued YouTube in New York federal court. Google’s motion for summary judgement seeking dismissal was granted in June 2010, as the court found they were shielded under the DMCA safe harbors. In April 2012, the Second Circuit was not entirely convinced that the case did not need to go to trial, and remanded it back to the district court. In April 2013, the district judge again granted summary judgment in favor of YouTube. In July 2013, Viacom again appealed the case back up to the Second Circuit. The litigation is expected to continue into 2014.

Cablevision

In March 2006, Cablevision announced plans to launch a service that would allow subscribers to record programming on a remote DVR, rather than subscribers needing a set-top DVR in their own home. TV networks sued Cablevision on a theory of direct infringement, rather than alleging secondary liability through the customers’ actions, and in March 2007, the New York district court found that the Cablevision remote DVR would directly infringe plaintiffs’ copyrights. In August 2008, the Second Circuit reversed the district court and found for Cablevision, holding (1) that the copies weren’t sufficiently fixed to be copies under the Copyright Act, (2) that consumers are the ones making records, not Cablevision, and (3) that playing a copy was a private performance, rather than an infringing public performance, since each copy could only be played by the subscriber who recorded it.

Zediva

Zediva was a service, launched in March 2011, which allowed customers to virtually rent a DVD which was played on a remote DVD player, and then streamed to the customer online. The film industry sued Zediva, and was granted a preliminary injunction in August 2011 which prevented the service from operating. In October 2011, the MPAA announced a settlement with Zediva, in which Zediva agreed to permanently shutter its service and pay $1.8 million.

ReDigi

ReDigi is an online marketplace for pre-owned digital music and also a cloud storage service, that currently only accepts music purchased from iTunes. ReDigi launched in October 2011, and was sued by Capitol Records in January 2012. In February 2012, the court did not grant a permanent injunction against ReDigi, but in March 2013, it partially granted Capitol Records’ summary judgment motion, deferring to Congress on the issue of digital first sale. Rob Pegoraro wrote in April on DisCo how this ruling is “another example of trying to fit a digital case into an analog frame, at the cost of denting some logic along the way.”

DISH Hopper

The DISH Hopper is a set-top DVR box with several features, including “AutoHop,” the Hopper’s commercial skipping feature. DisCo recently covered the status of ongoing copyright litigation against DISH’s Hopper, which was sued in 2012 in district courts in New York and California, and has prevailed so far against all motions that have been filed to attempt to prevent DISH from offering the service to customers.

Aereo

Aereo is a technology company that allows subscribers to view streams of over-the-air television on computers, tablets, and mobile devices. In September, DisCo covered the status of copyright litigation between television networks and Aereo in New York, where they were sued in March 2012, and Massachusetts, where they were sued in July 2013. (That post also covered ongoing litigation of television networks against another service, called FilmOn X, in California and Washington, D.C.) Just yesterday, Aereo was also sued in Utah.

TVEyes

TVEyes is a media monitoring company and search engine for broadcast TV and radio, whose clients include the Pentagon, the UN, Congress, and the NY Times. The service was sued by Fox News in July 2013 for copyright infringement and misappropriation. In September 2013, TVEyes responded asking the court to dismiss some of the claims.

from the a-big-first-sale-loss dept

This is hardly a surprise at all. In fact, we expected this kind of ruling all along. ReDigi, the company that was trying to build a "market" around "used MP3s" has lost at the district court. As you may recall, ReDigi tried to set up a system that monitors your own files, so that if you "sell" a used MP3, you have to make sure it's been removed from your own system. As you might imagine, that system is not foolproof, but some effort has been made (and it's only allowed for reselling MP3s ReDigi can prove you've purchased, such as via iTunes, and not for files just ripped from CDs). While I fully expected ReDigi to lose, the ruling is still fairly distressing in just how badly it distorts other parts of the law, which may harm other, even more reasonable uses. Hopefully, ReDigi will appeal and fight back against the more extreme interpretation from the district court here.

First, the court looks into the question of whether or not a transfer of a copyrighted file, where only one file remains at the end, still violates the "reproduction" right. That is, if Bob transfers a file to Alice, and Bob's copy of the file is immediately deleted, is that still a reproduction under the Copyright Act? The court says yes:

...courts have not previously addressed whether the unauthorized transfer of a digital music file over the Internet – where only one file exists before and after the transfer – constitutes reproduction within the meaning of the Copyright Act. The Court holds that it does.

The Copyright Act provides that a copyright owner has the exclusive right “to reproduce the copyrighted work in . . . phonorecords.” Copyrighted works are defined to include, inter alia, “sound recordings,” which are “works that result from the fixation of a series of musical, spoken, or other sounds.” Such works are distinguished from their material embodiments. These include phonorecords, which are the “material objects in which sounds . . . are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” Thus, the plain text of the Copyright Act makes clear that reproduction occurs when a copyrighted work is fixed in a new material object.

Of course, that same bit of the Copyright Act also makes clear that "copying" does not apply to purely digital files, but the court tap dances around that argument. Basically, it says whether or not there are more in the world is meaningless. All that matters is if a copy was made, even if the original was destroyed.

Simply put, it is the creation of a new material object and not an additional material object that defines the reproduction right. The dictionary defines “reproduction” to mean, inter alia, “to produce again” or “to cause to exist again or anew.” See Merriam-Webster Collegiate Edition 994 (10th ed. 1998) (emphasis added). Significantly, it is not defined as “to produce again while the original exists.” Thus, the right “to reproduce the copyrighted work in . . . phonorecords” is implicated whenever a sound recording is fixed in a new material object, regardless of whether the sound recording remains fixed in the original material object.

Basically, under this interpretation, you can never "transfer" a digital file. You can only make a reproduction under copyright law. And, yes, computers transfer files by making copies of them, but it seems a bit ridiculous that the whole concept of a transfer can be wiped out because of that. In fact, by this interpretation, even streaming (which still involves all the data being temporarily copied to your local computer) would count as reproduction. ReDigi pointed this out, noting the possibility of merely cleaning up your own hard drive being considered infringing, but the court buys Capitol Records's (EMI) argument that such uses are protected under other theories.

Moving on to the question of distribution, ReDigi doesn't deny that it's distributing files, but says that it's protected by fair use and (more importantly), first sale. Again, however, the court doesn't buy it. Part of the issue may be that ReDigi "abandoned" an argument it made earlier that merely transferring a file to a cloud locker for personal use is fair use, so it's left arguing that other aspects of its service are covered by fair use, but that's much more difficult under the basic four factors test. On this part, it's not that surprising that ReDigi failed to convince the court, as I'm not sure I see the fair use argument either.

The first sale part is where it gets more troubling. Effectively, the court wipes out first sale for digital goods, arguing that because (as above) each transfer is not really a "transfer" but a "copy," first sale doesn't apply. That is, first sale only applies to the initial "copy" "made under this title." But, the court argues, because the sale involves making a new copy, it's not covered by first sale.

In addition, the first sale doctrine does not protect ReDigi’s distribution of Capitol’s copyrighted works. This is because, as an unlawful reproduction, a digital music file sold on ReDigi is not “lawfully made under this title.” ... Moreover, the statute protects
only distribution by “the owner of a particular copy or phonorecord . . . of that copy or phonorecord.” Here, a ReDigi user owns the phonorecord that was created when she purchased and downloaded a song from iTunes to her hard disk. But to sell that song on ReDigi, she must produce a new phonorecord on the ReDigi server. Because it is therefore impossible for the user to sell her “particular” phonorecord on ReDigi, the first sale statute cannot provide a defense. Put another way, the first sale defense is limited to material items, like records, that the copyright owner put into the stream of commerce. Here, ReDigi is not distributing such material items; rather, it is distributing reproductions of the copyrighted code embedded in new material objects, namely, the ReDigi server in Arizona and its users’ hard drives. The first sale defense does not cover this any more than it covered the sale of cassette recordings of vinyl records in a bygone era.

That seems silly. Selling a legally purchased MP3 is absolutely nothing like selling a cassette recording of a vinyl record. When ReDigi points out that, under this interpretation, digital files have no first sale rights, the court hits back that this is not true. After all, it argues, you can still sell your hard drive with the original file on it. No, seriously. That's the court's response.

Section 109(a) still protects a lawful owner’s sale of her “particular” phonorecord, be it a computer hard disk, iPod, or other memory device onto which the file was originally downloaded. While this limitation clearly presents obstacles to resale that are different from, and perhaps even more onerous than, those involved in the resale of CDs and cassettes, the limitation is hardly absurd – the first sale doctrine was enacted in a world where the ease and speed of data transfer could not have been imagined.

The court argues that if such an interpretation is ridiculous (though it argues it is not) then it's up to Congress to fix it.

With that out of the way, the court says that ReDigi is guilty of direct infringement, contributory infringement ("the court finally concludes that ReDigi's service is not capable of substantial noninfringing uses"), and vicarious infringement. Basically, a triple play and ReDigi is completely out of the inning. While I'm still not convinced about the fair use argument, the court basically killing off first sale for digital goods is a pretty big problem, and hopefully higher courts (or, dare we dream, Congress?) will fix such an obviously nutty ruling.

In the US, Redigi is operating in the shadow of a lawsuit filed by the RIAA (with EMI/Capitol Records taking the lead). The RIAA wanted the company shut down, but the presiding judge refused to grant the injunction, citing concerns about the right of first sale, as well as a lack of "irreparable harm," as claimed by EMI. However, he did note that EMI's arguments were "compelling," which likely means that sooner or later, the RIAA will get its way. (The outcome of Kirtsaeng vs. Wiley will also have some impact this lawsuit, should it reach its conclusion first.)

Over in Europe, Redigi is relying on a ruling against Oracle (who was taking on UsedSoft, a software reseller), which claimed its software couldn't be resold. "Copyright exhaustion" is the key here -- a concept related to the right of first sale -- meaning the copyright holder's control ends once the sale is made. More importantly, the European court declared that the software could be sold even if Oracle's contract with the end user prohibits resale.

Obviously, this doesn't sit well with many rights holders. As we're all too aware, when we buy a digital good, we're usually exchanging our money for a license, rather than something we can resell or transfer or even move from computer to computer. These licenses allow the control to remain with the copyright holder (or the retailer/distributor) for long after the famous "first sale." As Redigi's CEO points out, if you block the customers' right of first sale, then they have vastly overpaid for these licenses.

[M]ost lawful users of music and books have hundreds of dollars of lawfully obtained things on their computers and right now the value of that is zero dollars.

Whether or not Redigi will be successful in Europe remains to be seen, but its business model is applying pressure to rights holders and their representatives to define more clearly what they feel customers are entitled to when they purchase a license disguised as a digital download.

Oh, and Redigi's CEO mentions books for a reason. The company is hoping to expand its current offerings from mp3s to ebooks... and video games. Rolling up on Amazon and re-triggering the AAA game developers' distaste for the secondhand market means things could get interesting in a hurry.

from the well-look-at-that dept

A few years ago, people always referred to the Beatles as the biggest holdouts in terms of releasing their music for sale as MP3s online (mainly iTunes). However, the Beatles finally came around in November of 2010. After that, people started putting together lists of who was left and AC/DC and Kid Rock seemed to top most of those lists. So it seems noteworthy that both have just caved. Kid Rock's new album is available on iTunes, with someone saying that he finally realized that he could "no longer ignore how much money he was leaving on the table." And, the latest is that AC/DC has come around as well. Of course, AC/DC wasn't just not selling downloadable tracks, but they seemed philosophically opposed to the whole concept based on some of their quotes:

"I know the Beatles have changed but we're going to carry on like that," guitarist Angus Young told Sky News in May 2011, after the Beatles had ended their own iTunes holdout. "For us it's the best way. We are a band who started off with albums and that's how we've always been."

Back in October 2008, the band were even more hardline. "Maybe I'm just being old-fashioned, but this iTunes, God bless 'em, it's going to kill music if they're not careful," singer Brian Johnson told Reuters.

"It's a...monster, this thing. It just worries me. And I'm sure they're just doing it all in the interest of making as much...cash as possible. Let's put it this way, it's certainly not for the... love, let's get that out of the way, right away."

Yup. But apparently they're finally realizing that maybe it helps to go where your fans are. A bit late.

Of course, looking at those quotes, they sound mighty familiar to what we're hearing these days about other services like Pandora and Spotify. Why is it that there's always a contingent of musicians who so want to hate the services that actually deliver a legal product to fans?

from the first-sale-is-dead dept

I've said before that I'm skeptical of the idea behind ReDigi -- a seller of "used" mp3s. The company claims it has a system to make sure that if you sell a music file you own, that they then make sure it's deleted from your computer. This just seems dumb for a variety of reasons -- some economic, some technological and some legal. But, most of all, I just don't see people caring enough to make this a valid business. Either way, whether it's dumb or not, the RIAA couldn't let the company actually try something new... so, of course it sued, with EMI subsidiary Capitol Records taking the lead on the case.

Somewhat surprisingly, the judge refused to issue the injunction, calling the case "fascinating" and noting that there were some serious issues to be dealt with concerning first sale rights around copyright (whether or not you can sell a product you bought that is covered by copyright). However, the judge also made it clear that he thinks that the record labels are likely to win in the end, saying that their arguments "look to be compelling." He just didn't issue the injunction because there was no evidence of irreparable harm if the site stayed up, as detailed in the transcript embedded below.

from the well,-look-at-that dept

The legacy entertainment industry has worked so hard to claim that getting any of their works for "free" must be illegal. Remember, the public service announcement created by NBC Universal and used by both the city government of NY and the federal government as an "anti-piracy" advertisement states that "there's no such thing as free" content. EMI, in its fight with MP3tunes, similarly tried to claim that it never, ever, released free music online -- a point easily proven to be false. So it's interesting to see -- as a whole bunch of folks have sent in -- that the DC libraries recently announced that library card holders can download free music from the library website from Sony Music. The library website says that it comes from "the entire Sony Music and IODA catalogs." You only get to download three songs per week, but they appear to be DRM-free mp3s. This is why it gets more and more difficult to take the big labels and the big studios seriously when they go on and on about how bad "free" is. They're using it themselves...

from the dumb-in-almost-every-direction dept

Earlier this year, we wrote yet another attempt (and there have been a few) to set up a system for "selling used mp3s." It seems like a pretty pointless idea for a few reasons. First, why bother? Second, all the convoluted and annoying systems the company puts in place to try to make this "legal" just makes it annoying and useless. But, third, as we noted at the time, there was no way that the RIAA would let this happen.

And, indeed, the RIAA is now demanding that ReDigi stop allowing for the sale of used mp3s. I'm having trouble thinking which is the dumber idea: trying to set up a convoluted and useless marketplace for selling "used" MP3s (something almost no one will want to do), or the RIAA even bothering to call extra attention to ReDigi by threatening and potentially suing.

A tip to the RIAA: this was dumb. Almost no one cares about or was using ReDigi anyway. It would have just faded away. By threatening, you bring them back into the limelight. On top of that, you (yet again) make yourselves look like clueless luddites who wish to wipe out the First Sale doctrine. Even worse, you could end up in a lawsuit that reminds you that the First Sale doctrine does exist, and is recognized by the courts, and you could establish a precedent that "reselling" used digital content is legal. So why bother, other than this bizarre and shortsighted infatuation with the idea that if anyone, anywhere benefits without you getting a slice, it must be illegal?

That said, just the fact that the RIAA insists used MP3 sales are illegal proves how the RIAA is being knowingly dishonest in comparing MP3 downloads to "stealing a CD." After all, it's perfectly legal to sell a used CD. However, if the RIAA is claiming that it's not legal to sell a used MP3, then it's admitting that digital files and physical products are different. Thus, it seems like a pretty weak argument to pretend that the rules of the physical world only apply when it helps the RIAA and the major record labels, but absolutely do not apply when it leads to consumer surplus.

from the interesting-legal-questions dept

There are a variety of different tools out there that let you "record" a YouTube video and turn it into an MP3, just as there are a variety of tools out there for converting Pandora streams to MP3s or converting internet radio to MP3s. Technically it's no different than "recording" something you hear off the radio, which is generally considered legal under the Audio Home Recording Act (which had plenty of bad things in it, but also included protections for people recording at home for personal use).

We may get a test of whether or not that applies to the online world, with the news that former Gnutella P2P client MP3Rocket has changed strategies and ditched its P2P offering to switch to an app that simply records YouTube videos and turns them into MP3s. The company seems to be relying on the Supreme Court's Betamax ruling, by claiming that since all it's really doing is "time shifting" the ability to listen to music streamed via YouTube, it's no different than the ruling that said it was okay to record television shows via video cassettes.

Of course, RIAA supporters and the like will quickly counter by pointing to the various lawsuits over whether or not XM's recording device was legal. Most of those lawsuits ended in settlements, so I don't think there's as strong a precedent that says that turning digital streams is infringement. However, you'd have to imagine that there's going to be one hell of a lawsuit either way.

The reality is that this is yet another case of the law not being able to keep up with technology. There simply is no intellectually honest rationale that says recording songs off the radio is legal, but recording songs off your computer is illegal. It's a weak attempt by an industry that doesn't want to deal with changing technology to put in place laws that prevent what the technology allows. Those never work.

It certainly would be nice to see the Supreme Court note that something like this really is no different than the Betamax ruling, but given the Supreme Court's various bad copyright rulings over the last few years, I have little faith that it will do so. Instead, it would likely just use a case like this to chip further away at the Betamax ruling, just as the Grokster decision did.

from the too-smart-for-your-own-good dept

About a year ago, we wrote about the somewhat bizarre case of a website called Bluebeat.com that claimed to legally be selling Beatles MP3s for $0.25. Of course, EMI disagreed and sued. Bluebeat's explanation was that it wasn't selling actual copies of the original music but had re-recorded the songs using "psycho-acoustic simulation," which made it a totally "new work" in their eyes. But not, of course, the eyes of the law. Basically, Bluebeat was trying to misread a section of copyright law and a court is having none of that. In a move that will surprise almost no one, the lawsuit against Bluebeat succeeded on summary judgment, with the judge noting that "BlueBeat fails to provide any evidence...showing how or why its purported 'simulations' are anything but illicit copies of the Copyrighted Recordings."